Clean Economy Investment Tax Credits (ITCs)
An investment tax credit (ITC) for carbon capture, utilization, and storage (CCUS) was initially announced as part of Budget 2021. Since then, this clean economy credit has been expanded to include clean technologies, clean hydrogen, and clean technology manufacturing credits, which all taxable Canadian corporations are able to claim through their corporate tax returns. Real estate investment trusts (REITs) can also claim the Clean Technology ITC. Eligible claimants can either be individual organizations, or part of a collaborative project.
Determining Eligibility
A number of different costs can now be claimed through tax returns to support infrastructure projects related to various forms of clean technology. Eligible costs are as follows:
- Carbon Capture, Utilization, and Storage (CCUS): Costs for carbon capture, transportation, and storage, and usage of captured carbon.
- Clean Technology (CT): Costs for property including solar, wind and water electricity generation, solar, air-source, or ground-source heat pumps, small modular nuclear reactors, and non-road zero-emission vehicles and related infrastructure.
- Clean Hydrogen (CH): Costs for equipment used to produce hydrogen through electrolysis of water or eligible hydrocarbons, as well as clean ammonia equipment, dual-use electricity and heat equipment, dual-use hydrogen and ammonia equipment, project support, safety, and monitoring equipment.
- Clean Technology Manufacturing (CTM): Costs of new machinery and equipment for clean technologies for use in Canada.
Calculating Credit Rates
Credit rates vary depending on the type of project as well as the achievement of specific targets. For instance, CCUS project must involve direct carbon capture from ambient air to receive the full 60% rate, while clean hydrogen credits must achieve specific carbon intensities to receive the full credit.
Other than the Clean Technology Manufacturing ITC, rates are also impacted by the achievement of specific labour requirements effective November 28, 2023, which require apprentices to be employed for at least 10% of Red Seal work, as well as the achievement of prevailing wage requirements in accordance with a collective agreement. Companies failing to meet these requirements will receive a 10% reduction in the tax credit rate.
Rates will be incrementally reduced between 2031-2034 onwards until the credits are phased out. Base rates are as follows:
| Tax Credit | Eligible Dates for Project Expenditures | Effective Date | Tax Credit Rate |
| CCUS | January 1, 2022 – December 31, 2040 | January 1, 2022 | 37.5-60% |
| Clean Technology | March 28, 2023 – December 31, 2034 | March 28, 2023 | 30% |
| Clean Hydrogen | March 28, 2023 – December 31, 2034 | March 28, 2023 | 15-40% |
| Clean Technology Manufacturing | January 1, 2024 – December 31, 2034 | January 1, 2024 | 30% |
Claiming Credits
For corporations, the Clean Economy ITCs are claimed through Schedule 31 (T2SCH31, Investment Tax Credit – Corporations), along with documentation detailing how the credit was calculated. The credit amount must also be specified in Line 780 the T2 Income Corporation Income Tax Return. For partnerships, a T5013 Statement of Partnership Income must be provided to each corporate member. A corporate member of the partnership must file through T2SCH31. All of these documents must be filed with the T2.
Multiple credits can be claimed for one project; however, these must apply to different types of property.
| Tax Credit | Line of Schedule 31 |
| CCUS | 200 |
| Clean Technology | 155 |
| Clean Hydrogen | 140 |
| Clean Technology Manufacturing | 170 |
Learn More
Contact us to learn more about the Clean Economy ITCs and how to apply.